Energy Futures On Pace For Gains

Market TalkThursday, Dec 17 2020
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Energy futures are once again reaching new nine-month highs this morning, and are on pace for a seventh straight week of gains, while the S&P 500 is poised to hit new all-time highs. Progress towards new fiscal stimulus in congress, a promise from the FED chairman to stand by with more monetary stimulus if needed, and some better-than-many-expected inventory data are all seeming to contribute to the rally in both energy and equity markets.

This latest breakthrough on the charts leaves little in the way of short term technical resistance, giving WTI a path to make a run at $50. ULSD charts are similarly open to a run at $1.60 after touching $1.50 for the first time since March 5 overnight, but RBOB will face an earlier test at the August high near $1.44 that’s just six cents from current values. All of the petroleum contracts have some sort of overbought short term technical indicators however, suggesting that they’re overdue for a short term correction. 

A major winter storm just dumped more snow on New York City than it got all of last winter, but with most people already working from home, this system does not yet seem to be the major demand disruptor that it would have been in a normal year.  

Yesterday’s DOE report had a decline in oil stocks despite a pullback in refinery run rates, as the U.S. import/export flows normalized as expected. The government’s estimate for gasoline demand was better than many predictions based on various evidence at street level of sharp declines in consumption as the lockdowns pick back up. Diesel demand also saw a nice recovery on the week, and is holding near its five-year average for this time of year, a remarkable feat given the drastic reduction in diesel-burning activities like mass transit.

Speaking of which, the EIA this morning published a look at fuel demand over the week of Thanksgiving, compared to last year, noting that gasoline consumption was down 12%, and jet fuel demand was down 42%, but distillate demand was actually 7% higher year on year.

Today’s interesting reads:

  • Why today’s Capital spending reductions are setting the stage for a huge rally in commodities over the next several years.

Click here to download a PDF of today's TACenergy Market Talk.

TACenergy MarketTalk Update 121720

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Market TalkThursday, Mar 28 2024

Energy Markets Are Ticking Modestly Higher Heading Into The Easter Weekend With Crude Oil Prices Leading The Way Up About $1.25/Barrel Early Thursday Morning

Energy markets are ticking modestly higher heading into the Easter Weekend with crude oil prices leading the way up about $1.25/barrel early Thursday morning, while gasoline prices are up around 2.5 cents and ULSD futures are about a penny.

Today is the last trading day for April HO and RBOB futures, an unusually early expiration due to the month ending on a holiday weekend. None of the pricing agencies will be active tomorrow since the NYMEX and ICE contracts are completely shut, so most rack prices published tonight will carry through Monday.

Gasoline inventories broke from tradition and snapped a 7 week decline as Gulf Coast supplies increased, more than offsetting the declines in PADDs 1, 2 and 5. With gulf coast refiners returning from maintenance and cranking out summer grade gasoline, the race is now officially on to move their excess through the rest of the country before the terminal and retail deadlines in the next two months. While PADD 3 run rates recover, PADD 2 is expected to see rates decline in the coming weeks with 2 Chicago-area refineries scheduled for planned maintenance, just a couple of weeks after BP returned from 7 weeks of unplanned repairs.

Although terminal supplies appear to be ample around the Baltimore area, we have seen linespace values for shipping gasoline on Colonial tick higher in the wake of the tragic bridge collapse as some traders seem to be making a small bet that the lack of supplemental barge resupply may keep inventories tight until the barge traffic can move once again. The only notable threat to refined product supplies is from ethanol barge traffic which will need to be replaced by truck and rail options, but so far that doesn’t seem to be impacting availability at the rack. Colonial did announce that they would delay the closure of its underutilized Baltimore north line segment that was scheduled for April 1 to May 1 out of an “abundance of caution”.

Ethanol inventories reached a 1-year high last week as output continues to hold above the seasonal range as ethanol distillers seem to be betting that expanded use of E15 blends will be enough to offset sluggish gasoline demand. A Bloomberg article this morning also highlights why soybeans are beginning to displace corn in the subsidized food to fuel race.

Flint Hills reported a Tuesday fire at its Corpus Christi West facility Wednesday, although it’s unclear if that event will have a material impact on output after an FCC unit was “stabilized” during the fire. While that facility isn’t connected to Colonial, and thus doesn’t tend to have an impact on USGC spot pricing, it is a key supplier to the San Antonio, Austin and DFW markets, so any downtime may be felt at those racks.

Meanwhile, P66 reported ongoing flaring at its Borger TX refinery due to an unknown cause. That facility narrowly avoided the worst wildfires in state history a few weeks ago but is one of the frequent fliers on the TCEQ program with upsets fairly common in recent years.

Click here to download a PDF of today's TACenergy Market Talk, including all charts from the Weekly DOE Report.

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Most Energy Contracts Are Ticking Lower For A 2nd Day After A Trickle Of Selling Picked Up Steam Tuesday

Most energy contracts are ticking lower for a 2nd day after a trickle of selling picked up steam Tuesday. ULSD futures are down a dime from Monday’s highs and RBOB futures are down 7 cents.

Diesel prices continue to look like the weak link in the energy chain, with futures coming within 1 point of their March lows overnight, setting up a test of the December lows around $2.48 if that resistance breaks down. Despite yesterday’s slide, RBOB futures still look bullish on the weekly charts, with a run towards the $3 mark still looking like a strong possibility in the next month or so.

The API reported crude stocks increased by more than 9 million barrels last week, while distillates were up 531,000 and gasoline stocks continued their seasonal decline falling by 4.4 million barrels. The DOE’s weekly report is due out at its normal time this morning.

RIN values have recovered to their highest levels in 2 months around $.59/RIN for D4 and D6 RINs, even though the recovery rally in corn and soybean prices that had helped lift prices off of the 4 year lows set in February has stalled out. Expectations for more biofuel production to be shut in due to weak economics with lower subsidy values seems to be encouraging the tick higher in recent weeks, although prices are still about $1/RIN lower than this time last year.

Reminder that Friday is one of only 3 annual holidays in which the Nymex is completely shut, so no prices will be published, but it’s not a federal holiday in the US so banks will be open.

Click here to download a PDF of today's TACenergy Market Talk.